Principal agent: the arrangement between owners and managers

For example, shareholders of a company (principals) elect management (agents) to act on their behalf, and investors (principals) choose fund managers (agents) to manage their assets. This arrangement works well when the agent is an expert at making the necessary decisions, but doesn't work well when the interests of the principal and agent differ substantially. Source: http://www.investorwords.com/3840/principal_agent_relationship.html

Sunday, March 30, 2008

Public sector wages 33% more than private

In the new york metro area, public sector average hourly wage in 2006 was $31.01/hr as compared to the $23.32 average in the private sector: http://www.bls.gov/ncs/ocs/sp/ncbl0872.txt

Thats really remarkable. State and local government employees earn a third more than private sector in the NY metro. That's easily a lifestyle-impact difference. How can this be?

Under what conditions would you expect this to actually correspond to the relative difference in hourly productivity? Conceptually, its difficult to see exactly how such a situation might arise in free labour market conditions.
Ought such an obvious difference in pay result in a highly competitive hiring process for state & local jobs? Why, then, the proverbial shortage in teachers? Why, then, such an infamously poor public education system?
Not really sure how to go about probing this further, but my off-the-hip reaction is to call shenanigans on this wages disparity!
From personal experience, the overall quality of service & human I've encounted in the course of my dealings with people on the NYS payroll is not easy to reconcile with the apparent disparity in wages.
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